President Donald Trump promised to eliminate federal taxes on tips for the service industry. Trump’s enormous federal bill, called the One Big Beautiful Bill until Sen. Chuck Schumer changed it to The Act, which was signed into law on Friday, ends tax on tips.
The Wall Street Journal describes this with an air of criticism:
“Only the first $25,000 in tips are free from income taxes. Tipped workers will still face the 7.65% combined payroll taxes that fund Social Security and Medicare. And workers won’t be able to benefit if federal officials say their type of service job doesn’t qualify.” WSJ estimates around $3,000 in savings for workers who rely on tips as steady income.
Well, $3,000 is nothing to sneeze at. That’s real money and could make a real difference to your favorite waitress or waiter. The new law goes into effect this year and has a sunset clause for 2028. No tax on tips is popular and will likely be extended regardless of whichever political party is in the White House and controls Congress.
Trump made the no tax on tips promise during the campaign last year. Democrats rejected it as unserious. But then Trump’s Democrat opponent quickly picked up the same message and leftist media outlets, just as quickly, began to report the plan in a positive light. Another display of tribalism in legacy media.
Democrats can’t cry about billionaires on this one as no billionaire receives a tip for anything. Tips are meant to supplement income for low-wage employees. Reporting tips is already an illusion to the IRS, so cutting it out helps on both ends.
Tons of promises were made during the campaign. The no tax on tips promise was one that could’ve been easily delayed. Another president could’ve ordered studies, claimed to need more time, or blamed the other party for preventing any accomplishments. That didn’t happen here. Trump promised to eliminate taxing tips. To a specific degree, he did that in his mega bill.
This win for service industry workers doesn’t make the mega bill worth passing. The increases to the National Debt and Debt Ceiling are enough to vote it down. Whatever happened to the idea of a single idea framed into a single bill? No tax on tips by itself would’ve passed with bipartisan support. And of course, eliminating federal income tax altogether would be much better. Nonetheless, it is nice to see a promise kept.